The present Law determines rules of issue and circulation of securities in the Azerbaijan Republic, regulates activity of securities market participants.

General definitions used in the present Law is as follows:

«Security» is a document, confirming property and non-property rights of their owner and possibility to transfer mentioned rights with observance of established form and obligatory requisites.

Securities are subdivided into issuing and non-issuing securities.

«Issuing securities» are securities, which are distributed by separate issues and have equal amount and terms of rights realization independent of the term of purchase.

«Non-issuing securities» are securities, which are not distributed by separate issues and have different amounts and terms of rights realization. Non-issuing securities include bills of exchange, checks, depository certificates; options, warrants, futures, privatization shares and other types of securities referring to this definition.

«Share» is an issuing security, confirming the right of its owner(shareholder) to part of the joints stock society profit in the form of the dividend, as well as participation in the management of joint stock society and right to the part of property, remained after its liquidation.

«Bond» is an issuing security,, confirming the right of its owner to get par value of the bond from the emitter within the period, specified in the bond, and fixed interest from this value or another proprietor equivalent (unless it contradicts legislation).

«Issue of securities» is a totality of securities of one emitter, providing their owners with equal rights, terms of issue (initial distribution) and registered under one and the same state registration number.

«Emitter» is a legal entity, executive or municipal authority, taking responsibility for realization of rights, specified in shares to the owner of these shares.

«Registered issuing securities» are securities, transfer of rights on which and realization of rights of which require obligatory identification of their owner and provision of the emitter with the information about owners in the form of securities owners register.

«Bearer issuing securities» are securities, transfer of right and realization of right on which does not require identification of their owner.

«Documentary form of issuing securities» is a form of issuing securities, owner of which is determined on the basis of submittal of an appropriately documented certificate or in case of depositing of securities – on the basis of record onto deposit account.

«Non-documentary form of issuing securities» is a form of issuing securities, the owner of which is determined on the basis of the record in the register of securities owners or on the basis of record put down to a deposit account.

«Certificate of issuing security» is a document, confirming totality of rights for the number of securities, specified in the certificate and issued by the emitter or by the emitter’s order – by the corresponding deposit-taker. The owner of the security on the basis of such certificate is entitled to demand the execution of the duties from the emitter.

«Circulation of securities» is a conclusion of property and legal transactions for the transfer of property right for securities.

«Distribution of issuing securities» is an alienation of securities from the initial owners by the emitter by means of conclusion of property and legal transactions.

«Professional participants of securities market» are natural and legal entities, operating at the securities market on the basis of a special agreement in accordance with the legislation.

«Number of state registration» is a digital (letter, symbol) code, identifying concrete issue of issuing securities.

Relations, connected to securities are developed on the basis of the present Law, other normative and legal acts of the Azerbaijan Republic and international agreements Azerbaijan Republic participates in.

1. State regulation of securities market supposes to include the following:

2. The corresponding executive authority carries out state regulation of relations at the securities market.

1. Voluntary association, union, and etc. of professional participants of the securities market, operating in accordance with the present Law and carrying out their activity on the basis of non-commercial principles, is called a self-governing organization of professional participants of the securities market (hereinafter referred to as self-governing organization).

2. Self-governing organization is found by professional participants of the securities market to ensure conditions for their professional activity, observance of professional ethics standards at the securities market, protection of interests of other clients’ of securities owners and professional participants of securities market, being the members of self-governing organization, as well as with the aim of participation in the determination on the basis of legislation of rules and standards of transactions with securities, ensuring effective activity at the security market.

3. All incomes of self-governing organization are to be used only for implementation of charter obligations and should not be distributed between its members.

4. According to requirements for professional activity and transactions with securities self-governing organization determines rules of professional activity at the security market, confirmed by the corresponding executive authority, for its members and control realization of these rules.

5. The corresponding executive authority controls activity of self-governing organization.

1. The order of registration, issue and circulation of issuing securities on the territory of the Azerbaijan Republic is determined in accordance with the present Law and normative and legal acts, adopted in conformity with it.

2. Rules of registration, issue and circulation of non-issuing securities is determined by the normative and legal acts of the Azerbaijan Republic.

3. Rules of issue of state and municipal securities, terms of their distribution and circulation are determined by the corresponding executive authority.

4. State duty is not to be paid for the initial distribution and circulation of securities on the territory of the Azerbaijan Republic. State duty is to be paid during registration of issuing prospectus (excluding registration in the order of privatization). Its amount and order of payment are to be determined by the corresponding executive authority in compliance with the legislation.

5. The corresponding authority regulates circulation of securities of foreign emitters in the Azerbaijan Republic.

6. Distribution outside Azerbaijan of the securities, issued by the emitters, registered on the territory of the Azerbaijan Republic, is carried out on the basis of resolution of the corresponding executive authority with consideration of interstate contracts.

1. Emitter is entitled for the issue of issuing securities from the moment of their state registration.

2. Registration of issuing securities is to be carried out by the corresponding executive authorities.

3. The emitter is to submit the following documents for the registration of issue of issuing securities:

4. The emitter and officials of its management bodies are responsible in the order, established by the legislation of the Azerbaijan Republic for the entirety and reliability of the information, contained in the issuing prospectus and internal documents.

5. State registration (or grounded refusal from it) is to be carried out within 15 days since the date of accept of documents, specified in the present article.

6. On the basis of information from the state registration bodies the corresponding executive authority keeps a common state register of securities, registered in the Azerbaijan Republic.

7. Officials of the emitter, who made a decision about issue of securities into circulation without state registration are responsible for the fact in the order, established by the legislation of the Azerbaijan Republic.

1. Grounds for refusal to registrate issue of issuing securities are as follows:

2. The resolution about refusal to registrate the issue of issuing securities and issuing prospectus can be appealed in court.

1. Issuing securities can be emitted in one of the following forms:

2. The form of security, chosen by the emitter is to be unequivocally stated in its foundation documents and (or) resolution about issue of securities , as well as issuing prospectus.

3. In case of issue of issuing securities in the documented form their owners can be provided with a single certificate for all purchased securities, specifying their total number, category and par value.

4. In case of documented form of issuing securities the certificate and resolution on the issue of securities represent documents, confirming the rights, assigned by securities.

5. In case of non-documented form of issuing securities the resolution on the issue of securities represents the document, that confirms rights, assigned by the securities.

6. Issuing bearer securities can be emitted only in the documented form.

7. The corresponding executive authority determines obligatory requisites of the certificate of issuing securities.

8. Name of the owner is an obligatory requisite of the registered emission security.

9. The corresponding executive authority sets requirements to securities and rules of regulation of the activity of organisations, printing securities.

1. The resolution about initial issue of securities is adopted by the founders, whereas similar resolution about repeated issues is adopted by the general meeting of the emitter.

2. The resolution about initial issue of securities is to include the following:

3. In case of documented form of issuing securities the emitter is to submit description (sample) of the certificate.

4. A separate resolution is to be adopted on each issue of issuing securities.

5. The registration of the subsequent issue is carried out only after the full sale of securities of the previous issue, provided that their par value is not less than the par value of the previous issue.

1. The procedure of securities issue represents a sequence of emitter’s actions for the distribution of issuing securities, determined by the present Law.

2. The issue of securities encompasses the following stages:

1. Issuing prospectus is to include the following information:

2. In case of repeated issue or reformation into joint-stock society of the juridical entity, having another organisational and legal form, issuing prospectus is to additionally include:

1. The issue (emission) of securities can be carried out in the following forms:

• Without declaration of the open sale and undertaking of advertising campaign (close sale)
• With publication of issuing prospectus (open sale)

2. In case of open (public) sale, requiring registration of issuing prospectus, the emitter is to ensure possibility for obtaining information, contained in the issuing prospectus and publish notification for information distribution in mass media.

3. The emitter, as well as professional participants of securities market, carrying out distribution of securities are obliged to create conditions for obtaining information, distributed before the purchase of securities to any potential owner.

4. In case of registration of issuing prospectus the emitter is to publish once a year general indices about his economic and financial status and totals of activity (balance of the emitter) in the newspaper of state importance in the order established by the corresponding executive authority.

1. The amount of distributed issuing securities is not to exceed the number, specified in the issuing prospectus about issues of securities.

2. The emitter can distribute issuing securities in the less number than specified in the issuing prospectus. The actual number of distributed securities is stated in the report of issue results, submitted for registration.

3. Undistributed part of securities, which is considered to be failed issue, is determined in compliance with the legislation.

4. In case of issue failure, return of means to investors is to be carried out in the order applied by the corresponding executive authority.

5. The emitter is to complete distribution of issuing securities within the period, fixed by the corresponding executive authority.

6. It is prohibited to give advantage to certain potential owners in comparison with the others during open distribution and circulation of issuing securities.

This provision is not applied in the following cases:

• During issue of state securities
• In case of rendering privileged right to the shareholders of joint stock societies for the purchase of new issuing securities in the amount pro rata to the available number of shares during adoption of the resolution about issue
• When emitters apply restrictions to the purchase of securities by non-residents.

7. The purchase of 35% and more of shares or shares, providing over 50% of shareholders votes, by a single juridical or natural person or a group of persons during initial distribution of emitter’s shares is regulated by anti-monopoly legislation of the Azerbaijan Republic. This requirement do not refer to joint stock societies, authorized fund of which does not exceed the amount of 75 thousand minimum salaries.

1. The emitter is obliged to submit the report about results of issuing securities issue to the registration authority not later than 30 days after completion of issue of issuing securities.

2. The report about results of issuing securities issue is to include the following data:

2.1. date of beginning and completion of securities distribution;

2.2. actual price of securities distribution (according to types of securities within the framework of the given issue);

2.3. amount of distributed securities;

2.4. total amount and types of means, received for the distribution of securities.

3. The registration body is to consider report about results of issuing securities issue within two weeks and register it in the absence of drawbacks connected to the issue of securities. The registration body is responsible for the entirety of the registered report.

1. Actions, reflected in the violation of the procedure of issue, fixed by the present Law and refusal on the part of registration authorities to register issue of securities, its suspension or acknowledgment of issuing securities issue to be failure, are considered illegal issue.

2. If registration bodies discover illegal issue, they are to inform the corresponding executive authority of the fact within 5 days.

3. Should securities be issued into circulation in the amount exceeding the amount, specified in the issuing prospectus, the emitter is to ensure realization of this excessive part of securities and payment of their cost. Unless the emitter fulfils the procedure within two months, the corresponding executive authority can appeal to court with the aim of confiscation of means, the acquizition of which was unjustified, from the emitter.

4. Officials of the emitter are responsible for the facts of illegal issue in the order established by the legislation of the Azerbaijan Republic.

1. Rights of owners to issuing securities, emitted in the documented form are confirmed either by certificates (if the certificates are kept by the owners) or records in the certificates and on deposit accounts in depositories (if certificates are kept in depository).

2. Records on personal accounts, available at the register-keeper (or emitter) in the register system and on depo accounts at the depository when account of rights is carried out by the deposit-taker, confirm rights of owners for issuing securities, emitted in the non-documentary form.

1. Right to securities, documented for the bearer is transferred to the person purchasing it as follows:

• In case of certificate availability at the owner – at the moment of handing this certificate to the person, purchasing it
• In case of certificates of securities, documented for the bearer and (or) account of rights for such securities in the depository – at the moment of accept record on the depo account of the purchasing person.

2. Rights to registered non-documented securities is transferred to the person purchasing it as follows:

• In case rights for securities being accounted by the depository – at the moment of accept record on the personal depo account of the purchasing person;
• In case of account of rights for securities in the register-keeping system – after accept records on his personal account.

3. Right to the registered documented security is transferred to the person purchasing it as follows:

4. Rights, assigned by the emission security, are transferred to the purchaser at the moment of transfer of rights for securities. The transfer of rights, assigned by the registered issuing securities is to be accompanied by the notification letter of register-keeper or deposit-taker or nominal keeper.

5. Rights, assigned by the issuing securities to the bearer are fulfilled by laying claims by the owner or his authorized person.

6. Rights, assigned by the registered documented issuing securities are fulfilled by the submittal of certificates of the mentioned securities to the emitter. In case of certificates of such securities being kept by the owner, the name of the owner specified in the certificate should be the same as the name of the owner, recorded in the register.

7. In case of documented issuing securities being kept in depositories the rights assigned by securities are fulfilled at the order of owners with enclosure of list of these owners, on the basis of certificates, submitted by the mentioned depositories. In this case the emitter ensures the mentioned listed person to enjoy the rights, assigned to him by the securities to the bearer.

8. The emitter ensures rights of persons, listed in the register-keeping system, on the registered non-documented issuing securities.

It is admitted to fulfil responsibilities in relation to the registered owner after the closing of register if the data about new owner of the security in question, necessary for the fulfillment of emitters’ responsibilities on securities (voting, obtaining of incomes and others) have not been submitted to the register keeper of the given issue or the keeper of the security before the closing of the register. Responsibility for untimely submittal of the information is to be taken by the person, purchasing security.

9. The notary or professional participant of the security market can certify the authenticity of the natural person signature in the documents (excluding legally specified cases) about transfer of rights for securities and rights, assigned by the securities.

10. The anti-monopoly legislation of the Azerbaijan Republic regulates the purchase of shares with voting right of more than 20% of the authorized capital of any emitter by a single juridical or natural entity or a group of persons, controlling each other’s property, in case of transfer of rights for securities and increase in the authorized capital of joint stock societies. This provision does not refer to cases, when the cumulative authorized capital of the emitter and investor is under 75 thousand minimum salaries, as well as joint stock societies, which are found during privatization of state enterprises and authorized capital of which is under 50 thousand minimal salaries.

1. The following kinds of professional activity can be undertaken:

2. Activity of juridical and natural entity at the security market is considered professional when it refers exclusively to the kinds of activity, specified in the chapter IV of the present Law.

3. Credit organizations can fulfil transactions with securities in compliance with the legislation.

4. Restriction to simultaneously carry out several kinds of professional activity by juridical and natural persons, undertaking professional activity at the securities market and fulfil transactions with securities is regulated by the present Law and other normative acts.

1. Broker activity is conclusion of civic and legal transactions on securities by juridical or natural entity, operating as and authorized person or commissioner (unless notes about their authorizations are not mentioned, as well as on the basis of power of attorney) according to the interests of his client at the expense of its client.

2. Professional participant of securities market, engaged in broker activity is called broker.

3. If the broker acts as a commission agent, the commission agreement can stipulate broker’s right to use funds, intended for capital investments into securities or gained as a result of securities sale before their return to the client in accordance with duties and contractual terms about keeping of these means by the broker.

4. Part of the profit gained as a result of use of mentioned funds, which remained in broker’s disposal, is transferred to client’s account according to the agreement.

5. Broker is entitled not to provide the client with warranties and promises about incomes, gained from capital investments at the expense of means that he keeps.

1. Dealer’s activity represents a transaction of the juridical entity on the purchase and (or) sale of securities on his own behalf and at his own expense, who declared prices of purchase and (or) sale of certain securities, took responsibility for the purchase and sale of mentioned securities at declared prices.

2. Professional participant of securities market, undertaking dealer activity is called the dealer.

1. For the purpose of the present Law control over securities is interpreted as an activity of a juridical or natural entity on the control over the following, which has been given into his possession and is owned by another person and in advantage of this person o the third person, mentioned by him:

And also as an activity on control over securities on his own behalf on the basis of power of attorney with charge for securities.

2. Professional participant of the security market, engaged in the control over securities is called administrator.

3. The order of securities transfer under control, rights and duties of administration are determined by the legislation of the Azerbaijan Republic.

1. Clearing activity is a determination of mutual responsibilities on the dispatch of securities (gathering of information about transactions on securities, their check, correction and preparation of accounting documents on them), taking of these duties into consideration and keeping of settlement on securities.

2. Organizations carrying out clearing on securities in connection with the settlements on transactions with securities take accounting document, drawn up during determination of mutual obligations with participants of security market, who make settlements on them.

3. Activity of clearing organization, carrying out settlements on transactions with securities is regulated by the normative and legal acts.

1. Deposit activity is a rendering of services for the keeping of securities and their certificates, as well as their account and transfer of rights for securities.

2. Professional participant of securities market, carrying out deposit activity is called the deposit-taker.

3. Only juridical person can be a deposit-taker.

4. The person, using services of a deposit-taker, is called depositor.

Deposit-taker cannot carry out kinds of activity, specified in articles 19, 20, 21 b 25 of the present Law.

5. The agreement, regulating relations between deposit-taker and depositor in the process of deposit activity is called a deposit contract (contract about deposit account). Deposit agreement is drawn up in the written form. Deposit-taker is to confirm conditions of deposit activity, undertaken by him and representing an integral part of deposit contract.

6. Conclusion of deposit agreement does not lead to the transfer of ownership right to securities from the depositor to deposit-taker. Deposit-taker is not entitled to dispose of depositor’s securities, control them or undertake other actions on depositor’s behalf in relation to securities, excluding cases, specified by the deposit agreement and fulfilled by the depository by depositor’s instruction. Deposit-taker is not entitled to demand depositor’s refusal of any right, specified by securities.

7. Deposit-taker bears civic and legal responsibility for the safety of certificate of securities, that he keeps.

8. Payment on depository’s obligations cannot be directed to depositor’s securities.

9. Deposit agreement is to include the following important terms:

10. General duties of deposit-taker include the following:

• Registration of facts of obligations on depositor’s securities;
• Keeping of depositor’s depo account as separate from other accounts with specification of date and ground of each operation on the account;
• Other obligations corresponding article 24 of the present Law.

11. Under deposit agreement depository is entitled to accept incomes on securities, kept with the aim of their transfer to depositor’s account, on its account.

12. Deposit-taker bears responsibility for the non-execution of his rights on the account of rights on securities or unsatisfied execution, including entirety and correctness of records of deposit accounts.

1. Keeping of register of securities owners represents activity on the gathering of indices, forming the system of keeping the register of securities owners, registration, processing, storage and transfer of securities.

2. Only juridical entities can participate in the activity to keep the register of securities owners.

3. Keeping of register can be carried out either by emitters or participants of the securities market at their order.

4. Persons, keeping the register of securities owners are called keepers (registrars).

5. Registrar does not keep the register of securities to the bearer.

6. Agreement for the register keeping is concluded only with one registrar. Registrar can keep the register of securities owners at the unlimited number of emitters.

7. Nominal keeper of securities is a person, registered in the register-keeping system, including the one, acting as a depositor of depository at the owner’s request and on his behalf but not being the owner of securities. Nominal keeper of securities acts as an authorized representative of owners’ right in relation to the register keeper.

8. Professional participants of securities market can represent nominal keepers of securities.

In compliance with the deposit agreement deposit-taker can be registered as a nominal keeper of securities.

9. Register keeper is to issue records from the register-keeping system on his personal account at the requirement from the owner or the person, acting on his behalf.

Except from the register-keeping system represents a document, issued by the register keeper and reflects data about owner’s personal account, availability of securities on the given account per each issue for the moment excerpt, obligations on them, as well as another data on the mentioned securities.

10. Rights and duties of register-keeper, rules of register keeping are determined by the legislation and agreement, concluded between the registrar and emitter.

11. The form of owner’s resolution on the transaction with securities and list of data are determined by the corresponding executive authority.

12. In case of replacement of register keeper with the emitter, the emitter is to declare the fact in news papers or notify all securities owners in written form on his own account.

1. Organization of trade at the securities market is a rendering of services, directly assisting to conclude civic and legal transactions with securities between participants of securities market.

2. Professional participant of the securities market, undertaking organization of trade at the security market, is called an organizer of trade at the security market.

3. Trade organizer at the security market does not strive for profit, although all incomes, gained as a result of this activity are used exclusively in his interests and not distributed between its founders.

4. Trade organizer at the security market is to provide any interested person with the following data:

5. According to the rules, established by the trade organizer any interested person is to be given the following data about each concluded transaction:

1. Stock exchange is an organization, exclusive subject of which is to create necessary conditions for the normal circulation of securities, determine their market prices (prices reflecting balance between demand for securities and their proposal), distribution of required information about them, as well as conditions for raising professional level of participants.

As an organizer of trade at the security market the stock exchange, being exclusively engaged in depository activity and activity on the determination of mutual obligations (clearing), cannot undertake other kinds of activities.

2. Stock exchange is set up in the form of close joint stock society.

3. Stock exchange organizes trade only between exchange members. Other participants of securities market can conduct transactions only through the mediation of exchange members.

4. Stock exchange carries out its activity on the basis of a special permit, issued by the corresponding executive authority.

5. Employees of the stock exchange cannot be professional participants of the securities market, founders and participants of the exchange, as well as independent participants of exchange as entrepreneurs.

6. Disputes, arisen between exchange members, as well as exchange members and their clients cannot be considered in court and arbitrage.

Professional participants of the securities market, undertaking activity, specified in the chapter IV of the present Law can become the members of stock exchange. The order of joining exchange membership, exclusion from it and leaving of it, as well as rules of exchange members activity are determined by its charter and other normative acts.

Internal normative acts, referring to stock exchange members are determined independently with consideration of proposals of exchange members.

1. In compliance with the present Law the stock exchange independently develops and confirms different rules and documents, connected to the conclusion of transactions in trade area, the order of settlements and account, activity of the stock exchange.

2. Stock exchange determines amounts and order of raising of:

3. Stock exchange independently determines methods for listing and de-listing of securities, issued for the circulation at exchange in the established order.

4. Stock exchange is to ensure publicity and openness of trade by means of information of exchange members about place and time of transactions conclusion, list and quotations of securities, issued for circulation at the exchange, results of trade session.

5. Stock exchange does not have the right to determine amounts of payments for gatherings excluding exchange transactions of its members.

6. Securities, that cane through emission procedure, specified by the present Law in the process of distribution and circulation and included into the list of securities, admitted for circulation by exchange, are put into circulation according to internal exchange documents.

The term «stock exchange» can be used in its name only by the stock exchange, which has obtained a special permit for exchange trade of securities from the corresponding executive authority.

1. For the purpose of the present Law any information, putting in advantageous position as compared with other subjects of the securities market persons, who dispose due to their work position and agreement with the emitter of not mass information (not specified for everybody) about emitter and issued securities, is considered to be confidential.

2. Persons, disposing of confidential information are not entitled to use it during conclusion of transactions and inform third parties of it for the aim of transactions conclusion.

3. Persons, failing to observe these requirements are to be prosecuted under the legislation of the Azerbaijan republic.

1. Persons, violating the present Law and other legal acts of the Azerbaijan Republic about securities bear responsibility in cases and order, applied by the civic, administrative and criminal legislation.

2. The damage incurred as a result of violation of Azerbaijan legislation about securities is to be compensated in the legally applied order.

3. Professional participants of securities market are not entitled to manipulate prices at the securities market by means of rendering purposely distorted information, inclusion of information about securities, emitters of issuing securities, prices of securities into advertisements and push clients to buy and sell securities.

The above actions of professional participants of the securities market serve as a ground for suspension and annulling of special permit, issued to them.

4. The fact of manipulation with prices at the securities market is to be determined by court.

5. The corresponding executive authority takes following measures against the emitters, undertaking illegal issue of securities:

6. Under the legislation of the Azerbaijan republic and by order or registration body and orders of other state authorities, fulfilling regulation functions in the filed of securities market the issue of securities can be considered invalid.

7. Acknowledgment of securities issue invalid can be served as a reason for confiscation of securities, issued with violation of established rules of registration and emission from circulation and return of monetary means (other property), gained by the emitter at the expense of securities payment, to owners.

8. Undertaking of professional activity at the securities market is considered to be illegal without special permit.

9. Professional participants of securities market, emitters of securities, as well as their officials are entitled to claim actions of the corresponding executive authority aimed at the elimination of violations of Azerbaijan legislation about securities and taken measures in the order applied by the legislation of the Azerbaijan republic.

The Law No 383 of the Azerbaijan Republic «On securities and stock exchange» at November 24, 1992 loses validity since the effective date of the present Law.

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Non-official translation